Sunday, March 29, 2015

Implementation of Dodd-Frank quietly continues. The newest change will take place this summer when the TILA and GFE forms are modified. Most Americans will barely notice it. Should we be concerned?

The pros and cons of Dodd-Frank spawn endless debate, with no outright winner. Depending on one's perspective, it's difficult to find a consistent right or wrong answer.

The left proffers a need for increased regulation with a closer eye on Wall Street, banks and the finance industry in general. Their "gift," the "Consumer Finance Protection Bureau" is funded by the fines of offenders. In the eyes of Elizabeth Warren and other "reformers," it is the medicine necessitated by greedy, opportunistic villians who have made their fortunes preying on vulnerable Americans.

The right counters, accurately contending that the casualities of Dodd-Frank are not so much the big banks, but the community banks. The is due to the costs of accountants and attorneys. Both are needed to "interpret" Dodd-Frank and defend against unknowing infractions. Legal and accounting fees are more easily assorbed by the larger institutions.

There is no easy asnwer to this "clash of perceptions!" It will come down to the 2016 election. If Americans believe that the regulations are worth the extra time, money and paper, they will elect Hillary Clinton President. It depends on how the merits and downsides of the law are positioned. Thus far, Republicans have done a poor job showing how Dodd-Frank impacts the average American.

To see Dodd Frank is to see it as an industry person. Few Congressmen or Senators have ever originated a mortgage loan! Even fewer have counciled average borrowers on "types" of loan. There are members of the far right who contend that people shouldn't be borrowing money to begin with!

In a perfect world, we would pay cash for everything. Nobody would have a mortgage on their home. Everyone would have a job. Everyone would pay a simple flat tax with no deductions. Certified Public Accountants would become non-essential. Unfortunately, that's not the world we live in!

To listen to the President, those "dirty mortgage brokers" caused the banking meltdown! Let's eliminate them and the problem will be solved!

This type response demonstrates Barack Obama's depth on the issue. Those "dirty mortgage brokers" were the end result of a Wall Street gone insane with greed. "Greed" resulted in the large banks creating sub-prime loans that carried high(7-8%) margins on adjustable rate mortgage loans. These loans were then sold to borrowers who ordinarilty did not qualify for a loan.

Specifically, a borrower with a 560 credit score, unable to verify income, with no money for a down payment was given a mortgage loan. A loan may have started at 5.5%. But, it could potentially rise to 13.5%. If you are borrowering $200,000, you are talking about your mortgage payment more than doubling.

The margin was based on the L.I.B.O.R.(London Inner Bank Offered Rate), a measure between the dollars relationwhip with the Euro. With a margin that often exceeded 7%, a sudden rise in the L.I.B.O.R. could spell disaster for borrowers who had taken out a "2/28 or 3/27 ARM" loan!

Why did rates rise? Then head of the Federal Reserve, Henry Paulson contended that rates needed to increase in "bite sized" increments to prevent possible inflation. Then Kentucky Senator, Jim Bunning blasted Paulson's approach, stating it was "like giving medicine to someone who wasn't sick!"

Industry textbooks today suggest that the entire meltdown was premeditated. The goal was to create permanent renters within the population. When noting that Paulson himself is a C.F.R. member, the argument gains credence! After all, a tiny segment of the population benefited enormously from the meltdown. The investment class has since rebounded. Only what remains of the middle class remains stuck, still trying to understand what went wrong!

Wall Street and the big banks' animosity toward independent financial consultants
(AKA mortgage brokers) is easier to fathom. By 2005, better than 70% of mortgage loans were done by these parties. Many specialized in gaining financing for customers initially turned down by their primary bank or credit union.

To be sure, a huge number of those working as independent financial consultants were not suited for the position. Most of the industry resisted mandatory licensing. As late as 2008, only members of Mortgage Broker business' were required to hold licenses.

The S.A.F.E. Act emerged. Unfortutely, it introduced distinctions known as "Licensed Mortgage Loan Originator" and "Registered Mortgage Loan Originator." The latter are not required to take the rigorous S.A.F.E. exam. Guess who employs "Registered Mortgage Loan Originators?" If you guessed "Charter Banks and Credit Unions," you are correct!

The newest element of Dodd-Frank that came into law earlier this year prohibited Brokers from making more than 2.5% on a loan. Sounds good, except for one detail: "Title fees must be paid from the 2.5%," making the maximum earnings on a $100,000 loan $2500. Title costs run roughly $1000 on a $100,000 loan. Thus, the broker must pay his expenses of doing the loan from $1500. The number simply doesn't work!

Should we be concerned with the loss of these Independent Mortgage Brokers? If you seek a small loan, you might be? A perfect example lies with the Kentucky Housing Corporation. These are low interest loans requiring little or no down payment. They are designed for low income borrowers.

Unfortunately, Dodd Frank stipulates that Originators may be paid on overall "volume," not fees per loan. Charter Banks pay on volume. An Originator may have an annual volume objective of Ten Million. Small loans take as much time as large loans. By 2011, most of the large banks had ceased to do Kentucky Housing Loans.

Up until recently, Brokers filled the need. Under the new law, to do a $75,000 loan amounts to the Broker having to personally bring money to the table. This they won't do. The end result: those seeking small loans lose their primary facilitators!

The good news for Dodd-Frank Advocates is they can say that they "protected" the innocent from potential predatory lenders. True, they are unknowingly excluding these "innocents" from homeownership; while killing off thousands of small business' in the process.

To be sure, there are no more 2/28 or 3/27 ARM loans with 7 or 8 % margins. Creating such products and targeting the kind of borrowers who endured them should never have happened. But, to blame Mortgage Brokers for them is shortsighted. A Mortgage Broker is a salesman, a "straight commissioned, on collection salesman," working for large banks, such as J.P. Morgan Chase, Wells Fargo and Countrywide. We should never forget that ALL THREE banks authored such loan products.

Dodd-Frank was written under the pretense that some banks are too big to fail. While, there are inconveniences such as losing their cheap labor force and contending with C.F.P.B., they continue to enjoy clear favoritism.

Meanwhile, the biggest losers are those attempting to become homeowners. Getting that first home is always the trick. Even more difficult is getting it with minimum income. Yet amazingly, the mortgage payment on a $75,000 loan is far less than the rent that the person is likely paying.

Sunday, March 22, 2015

Cynical? Perhaps. But as 2015 kicks in, some brief enthusiasm resulting from decisive midterms appears to be fading rapidly. Are we truly surprised?

The American middle class has been the subject of numerous contemporary writings. It seems that both Republicans and Democrats have figured out "how" to bring relief to their woes. Different proposals chase the same highly sought after solution. Most mainstreamers take them with a grain of salt. It's like the possibility of Hillary Clinton facing Jeb Bush in the 2016 Presidential election.

"Red team versus Blue Team, playing for the same university."

The cynicism is real. It's accompanied by a mood of anger and apathy. No matter what any entrenched Washingtonians may profess, it's "them versus us." Maybe that's why Ted Cruz' has gained notable traction with mainstream America.

Meaningful words are great. Giving the impression that you, at least, understand Joe Six-Pack, is smart politics. But where do the tangibles come into play? We are hearing some excellent rhetoric from Senator Cruz. Put some "meat on the bones," if you please!

Rand Paul's "meat" is relatively easy to research. Take the time to read G. Edward Griffin's "The Creature from Jekyl Island." The book was considered the "bible" by "Ron Paulies'."It hints at an option more viable than Americas' ruling class dares to imagine!

America likes an underdog and nobody is more aware of this factor than Senator Marco Rubio. Knowing "how" to win an election begins with packaging. Rubio described Barack Obama as a "gifted orator, producing a message that sounded both in tone and in substance like that of a moderate."

Rubio has picked up on what has been Rick Perry's signature achievement in Texas: "An affordable college education." Texas now has thirteen colleges and unversities offering a four-year degree for $10,000. That's $1250 per full-time semester. Rubio is proposing it for America.

Affordable college tuition is certainly on the Middle Class wish list. Yet, it pales in comparison to what Americans' truly want to see implemented: "Identity theft prevention."

Identify theft is the world's fastest growing crime. Yet the necessary measures go straight at America's dark corner. To fully go after it would require a close inspection of how we do business in the country. Placed it that light, we realize how money driven our large corporations are. It is truly all about a "buck!"

We begin with debt recovery and the industry itself. Most all employed for Trans Union, Equifax and Esperian work offshore. Have you attempted to contact them lately? If so, you may have learned that their people are somewhat inaccessible. This creates a challenge when attempting to correct a mistake!

Derogatory marks on one's credit report can literally make the difference in how people live, where they work and even if they eat. Yet, it takes a back seat to the Middle East, Crimea and North Korea in Governmental priority.

Why is this? Could be because our "leadership" doesn't want to rock any boats, make any waves! To start a stink about the credit bureaus would ultimately result in a bigger stink over "why" Fortune 500 companies such as A.T.&T. and J.P. Morgan Chase, not to mention smaller companies like D.I.S.H. network are utilizing cheap, unvetted, off-shore help."

One A.T.&T. worker surmised, "the union would never allow call center employees to work for minimum wage!" When asked if those positions might be placed in right-to-work states he added, "might be the best solution in the end. Because, in places like Mississippi and Alabama, $16,000 per year and benefits ain't that bad!"

Never mind that such a decision would open a monsterous "barrel of eels."

Cleaning up the credit bureaus would be a major undertaking in itself. There is no motivation for bureaus to remove derogatory marks once satisfied. While we do have the Fair Credit Reporting Act, it often takes the assistance of a FCRA Attorney
to expedite updates and removals.

A Presidential candidate who honestly placed the average American first, would introduce two measures. Both would impact the country in a manner unmatched in the history of the U.S..

They would start by requiring that all derogatory remarks not related to bankrupcy, be deleted at the end of 60 months. No claim of less than $500 would be allowed on any bureau for any reason. All employees working in a debt recovery capacity would be required to hold (a)either a series six or seven securties license or (b) a juris doctorite.

They would also make unlawful the practice of offshore outsoucing for any job that required the use of all or part of an Americans social security number. In short, if even an incrypted social was required, the call centers serving those customers would be required to opperate from U.S. shores. There would be no exceptions.

Too rigorous? Definitely not! We are dealing with the privacy of Americans. Too many companies are willing to compromise Americans' privacy for "a buck."

No doubt the big boys would "howl," over such developments. Politicians taking the side of mainstream America would be threatened, bribed, and encouraged to "work within the system." Never mind that the system itself was rotten!

Are there any potential candidates, Republican or Democrat, who might take this issue and run with it? I wouldn't hold my breath!

Hillary Clinton symbolizes the system itself. Don't expect relief from this source!

Elizabeth Warren is too deeply rooted into the "need for a higher minumum wage in America" to ever be counted upon to support such a measure.

Bernie Sanders would determine the proposed legislation, "not without merit, but impractical."

Rand Paul is at least talking about the Federal Reserve and why it's abolition is in our best interst.

Ted Cruz' "it's us versus them," makes us feel good! But, does it go further than eloquent dialog?

In Jeb Bush, as with Hillary, we see "more of the same."

Rick Perry is talking "10th amendment." This is about philosophy. Expanding state's rights would have winners and losers.

Scott Walker is hinting at a national right to work law. This, in itself, would be revolutionary. The question becomes, "would he expand his position to push for a total ban on all public sector unions?"

Marco Rubio has seen the system up close, from the prospective of someone trying to get ahead. But, now that he's made it, would he forget how he personally got there?

Chris Christie talks tough and might actually follow-through with the corrective measures referenced in this post. Yet, I can't see him "kicking" Fortune 500 companies "in the teeth," and subsequently asking them to fund his presidential campaign.

Sunday, March 1, 2015

Nothing has really changed. The conference is dominated by "twenty-somethings," bright eyed, bushy tailed and utterly clueless on what it takes to win an election.

Let's begin with their hero, Rand Paul. Paul is "a collection of insights derived from father Ron and John Stossell." Ideas with no clear path on how to implement them.

Austerity measures are fine; as long as we are only talking about those not receiving any sort of entitlement from Uncle Sam. Discussion about abolishing the Federal Reserve has merit. But, with most mainstreamers, it's confusing if not baffling. Isolationism will always have proponents. Unfortunately for Paul, the opposition has deep pockets!

A Paul versus Clinton general election, would probably be a repeat of Goldwater-Johnson. Of course, these "twenty-somethings" were not around in '64. They didn't witness the scare tactics employed by LBJ's clever team. Hillary would take a page from the past, use her massive war chest and scare the socks off much of America. The sad aspect is Rand could be a great future Presidential candidate! It's a timing thing.

Paul's dilemma equates with choosing between running for President or running for Senate re-election. The latter would be a slam dunk victory. The former would most likely cost Republicans a Senate seat that they could not afford to lose. True, Rand is challenging this Kentucky law. He even has solicited the help of Hal Heiner and other hopefuls who aspire to be the next Kentucky governor. Standing in his way however, is Kentucky Secretary of State, Alison Lundergan Grimes who deeply covets that Senate seat for herself.

Ted Cruz made as good of a speech as can be made. He unquestionably has the pulse of the Tea Party. His words ring true: It has become the "people versus Washington." Yet, outside of shutting the government down, I haven't heard of a long lasting strategy to bring about necessary reform. Maybe it's because there isn't a long lasting strategy on the table.

Ironically, Paul could lay the groundwork for such a plan. But it would require patience on his part. Run for President in '16 and hope for the best. Or, return for a second senate term and sponsor a term limits amendment to the constitution. True, it would royally "piss off" the old guard! Mitch McConnell, John Boehner, Thad Cochran and others would call Rand "everything but a white man!" Yet, this action must be done. We have seen how quick the old guard was to compromise conservatives with the DHS issue!

It's probable that Congressional and Senate leadership would not allow a floor vote on a term limits measure. But, Paul would have proven his point: Only through a constitutional convention or a Convention of States can corrective measures be adopted. At that point, Kentucky's now Junior Senator would be ready to run for President. Preferably after winning the Kentucky Governors mansion in '23.

Meanwhile, we must deal with 2016 and winning the general election. I think it's safe to say that ANY Republican would be preferable to Hillary Clinton. Yet, it appears that many staunch conservatives would opt to stay home if Jeb Bush were the choice. Amid some "boos" the former Florida Governor's responses to Sean Hannity's questions bordered on impressive. Yet, Jeb is clearly enamored with immigrants. He has expressed truisms that many long time Americans consider antagonistic. His support for "top down" education, albeit from the state and not federal level, is a deal breaker for many. His immigration position isn't too far from his brothers.

Marco Rubio would be an intriguing option and he truly had his game face on this past Friday. But can he (a) secure the necessary financial support if Jeb Bush chooses to run and (b) can he overcome the same liability haunting both Cruz and Paul: "Junior Senator with no Executive experience."

Scott Walker encountered a bump but was impressive overall at CPAC. He is seen as "the answer" in a lot of GOP circles. He is a Governor who has stood up to major Democrat constituencies. He is plain spoken, appealing to Nascar Dads. He has Executive experience and has a solid record of accomplishment in a "deep blue state." His anti-union stance is polarizing, but refreshing.

Rick Perry gave another fiery speech, reminding CPAC members both of the landscape of a troubled world and his own accomplishments while serving as governor of Texas. In truth nobody would have expected a question about the environment at a CPAC convention. But it served Perry well as he recounted surprisingly solid improvements in CO2 levels, ozone levels and more.

A conservative political action committee conference is probably not the place to discuss "building new constituencies or broadening the tent." But it should be! A successful convention amounts to leaving with a true plan of securing general election victory. Those backers of Rand Paul and Ted Cruz have neither.

Scott Walker supporters see him as the anti-Washington, anti-establishment voice of forgotten America. But, can Walker secure 40% of America's Hispanic vote? Furthermore, can he win his home state? Wisconsin has not gone "red" since 1984. No president has ever been elected when not carrying his home state.

Marco Rubio would obviously attract Hispanics. His ideas are fresh and pertinent. His views on foreign affairs "click" with defense contractors. Friday he let it be known that he did not want to spend a lifetime in politics.

Rick Perry is expected to run. He will be accompanied by a record that surpasses all suitors. But, can he get the necessary attention. Will his failed 2012 campaign haunt him? Money won't be a problem for the former Texas Governor. Outside of Jeb Bush, no other candidate will be better financed. For Perry, it's a simple matter of convincing Republican voters that he is electable. His stalwarts will argue that he is the only candidate who can appeal to Establishment, attract Tea Partiers, and mobilize Evangelicals.

While emotion may have ruled at CPAC, Republican strategists are quietly determining what it will take to secure the necessary 270 electoral votes. This translates into "how to win Florida, Virginia, Ohio, Colorado, New Mexico, Iowa and Nevada." In most cases the "bottom of the ticket" may be the difference.